Friday, February 15, 2019

Solutions to Gentrification

To follow up on previous posts about gentrification and rising housing costs (here and here), I've laid out some policy recommendations, most of which have already been articulated by the Obama Admin and the Urban Land Institute.

Much of the narrative around gentrification has been shrouded in confusion. The left-wing activists who have taken up this cause frame the problem in terms of race and class warfare, which might be emotionally appealing but is factually wrong. Rent hikes are not caused by malicious landlords intent on taking every last penny from their working class tenets, or white hipsters and yuppies conspiring to remove minorities from an area, but bad land use policies that drive up rents by restricting the supply of housing; landlords and yuppies, like other suspected bad faith actors, are simply following the incentives created by governing agencies.The negative affects of gentrification (i.e. pricing out low income often minority tenets) cannot be alleviated without eliminating the main contributing factor to astronomical rent hikes: artificial limits on the supply of housing. As I explained in the previous post, the main problem is local zoning and building code restrictions that prevent developers from creating enough housing to accommodate growing populations. One very straight forward solution is to allow more by-right development, especially for rent controlled and low income housing, and waive impact fees (Jakabovic, Ross, Simpson, & Spotts, 2014). This would not only expedite the construction approval process, eliminating the time needed to apply for multiple variances and entitlements, but also reduce the cost of starting projects (Jakabovic et al., 2014). Reducing or eliminating parking space minimums, restrictions on unit size and density requirements will allow developers to build accommodations for more residents (Jakabovic et al., 2014). Inclusive zoning that allows alternatives to single family housing, such as group homes, multi-family complexes, Accessory Dwelling Units, and mirco-units will not only provide more options but also make metro areas more affordable for more people. Additionally, allowing non-profit charities to build tiny houses for the homeless, which could be done as low income housing, would both reduce homelessness and alleviate the burden on city shelters saving local taxpayers money and providing the underclass with an independent living space and an opportunity to get back on their feet. Waiving impact fees would be a necessary first step to allow these types of projects. As the Urban Land Institute noted in their 2014 report on affordable housing, impact fees tend to impose higher costs on smaller projects when they fail to account for factors such as unit type and size. Offering property tax exemptions for affordable and low income housing production would also make it more readily available.

Streamlining permitting and monitoring processes and coordinating housing regulations across multiple jurisdictions would make new rental units, both market rate and rent controlled, more affordable, on the supply side. Urban regions often have multiple jurisdictions with different building and zoning codes (Jakabovic et al., 2014). Having to comply with multiple and sometimes contradictory sets of procedures and regulations burdens developers working in multiple jurisdictions; coordinating zoning and building codes or having a unified code for all land and housing regulations would reduce compliance costs (Jakabovic et al., 2014). Eliminating duplicative paperwork for the underwriting, due diligence, and monitoring processes for each lender and regulatory body would also reduce compliance costs (Jakabovic et al., 2014). Additionally, jurisdictions should provide developers with a clear permitting time frame to reduce delays in construction and holding costs (Jakabovic et al., 2014). Of course, housing markets are not monolithic so cities and states will have to tailor any land reforms to the needs of their residents.

Instead of trying to find a convenient scapegoat to blame for these problems, we could work together to find solutions without the unproductive protests and grievances. Unfortunately that would also require us to change the current narrative about gentrification which many people are politically and emotionally invested in.

References

Jakabovics, A., Ross, L. M., Simpson, M., & Spotts, M. (2014). Bending the cost curve: Solutions to expand the supply of affordable rentals.

Wednesday, February 13, 2019

How Zoning and Building Code Restrictions Increase CO2 Emissions

One of the biggest findings of an Obama Admin white paper on affordable housing is that local land use restrictions, particularly zoning ordinances and construction approval processes, is a major contributing factor to rising housing costs and its associated effects (i.e. urban sprawl and gentrification). The crux of the research draws on the widening gap between real construction costs and housing prices over the decades, particularly in the metropolitan areas of major cities like Los Angeles and New York. In fact, the manufactured housing crisis is almost exclusively a problem in metropolitan areas on the east and west coast. There are generally three types of housing markets: areas in which housing is priced below construction costs, areas in which housing prices are close to construction costs, and areas in which housing prices are significantly higher than construction costs (Glaeser & Gyourko, 2003). For the most of places in the U.S., housing markets fall into the first two categories (Glaeser & Gyourko, 2003). In some places, like California, there are almost no homes below or close to construction costs; in California, there are few homes priced below 1.4x the cost of construction (Glaeser & Gyourko, 2003). Mean housing prices in metropolitan areas haven risen at an average of 1.7% annually since 1950 (Glaeser, Gyourko, & Saks, 2005). Between 1950 and 1970 rising home costs mostly reflected improvements in construction quality; new home prices rose in an almost one to one ratio with physical construction costs (Glaeser et al., 2005). However, after 1970, housing prices continued to rise even as the cost of physical construction leveled off (Glaeser et al., 2005). For instance, construction costs in San Francisco only rose 4.6% and construction costs in Boston only rose 6.6% between 1970 and 2000. Over the same period, average house prices in San Francisco rose 270% while average home prices in Boston rose 120% (Glaeser et al., 2005). Rising land values and artificial restrictions on construction represented 75% of inflation in house prices (Glaeser et al., 2005). This was evident in diminishing rates of new construction. Between the 1950's and 1990's, the median rate of new construction in metropolitan areas fell from 40% to 14% (Glaeser et al., 2005). In Los Angeles, San Francisco and New York the median rate of new construction fell to well under 10% by the 1990s from previous highs of 60%, 30%, and 20%, respectively, in the 1960s (Glaeser et al., 2005). Higher house prices usually spur a surge in new construction, but burdensome land use restrictions prevented the housing market in metropolitan areas from meeting growing population demands.The rapid rise in housing prices and diminishing rates of new construction coincided with the rapid growth of land use regulations in metropolitan areas between 1970 and 1990 (Gyourko & Malloy, 2014). Population density only accounts for a small contribution to the declining rate of new construction and land only accounts for 20% of the value of new homes (Glaeser & Gyourko, 2003).

Metropolitan areas don't have low wage problems or overpopulation problems; they have zoning problems. In housing markets where prices far exceed construction costs, developers have to comply with multiple, and often conflicting, housing standards and regulations and are sometimes required to conduct separate appraisals, reviews and inspections for each source of funding (Jakabovics, Ross, Simpson, & Spotts, 2014). Developments that exceed zoning restrictions on the type and size of development must received approved variances and entitlements, which delays construction and adds to the overall costs (Jakabovics et al., 2014). Jurisdictions can also add density requirements, height maximums, size minimums and parking space minimums, which in aggregate reduce the supply of affordable housing units (Jakabovics et al., 2014). Parking space minimums also add to construction related costs and drive up rents; for instance, in San Francisco, the average parking space adds between $25,00 and $50,000 to construction costs (Jakabovics et al., 2014). In addition to these regulations, jurisdictions can also dictate where affordable housing can be located and can ban certain types of housing such as group homes, micro-units, and ADUs (Jakabovics et al., 2014). Building codes that dictate the type and size of certain amenities, as well as the aesthetic features of buildings, can also add to construction related costs (Jakabovics et al., 2014).

Implications for the Environment

The environmental implications of burdensome zoning ordinances should be obvious to everyone; it doesn't take a brainiac to figure this out. Rising housing costs push residents out of metropolitan areas resulting in longer commute times to work. In aggregate, longer commute times increases traffic resulting in more CO2 emissions. The Obama admin noted this very same conclusion in their white paper 'Housing Development Toolkit.'

The long commutes that result from workers seeking out affordable housing far from job centers place a drain on their families, their physical and mental well-being, and negatively impact the environment through increased gas emissions.

Any liberal effort (or democratic socialist as they are akin to calling themselves nowadays) to reduce greenhouse gas emissions and save the planet will be in vain if they don't address the affordable housing crisis in their own communities and it's manufactured cause of overly restrictive zoning ordinances. Electric cars aren't going to do us any good if people still have to drive 2 hours to work. Public transit isn't going to do us any good if people can't afford to live where it's available. The primary focus of any climate change agenda should be land reform.

References

Glaeser, E., & Gyourko, J. (2003). The impact of zoning on housing affordability.FRBNY Economic Policy Review, 21-37. doi:10.3386/w8835

Glaeser, E. L., Gyourko, J., & Saks, R. E. (2005). Why have housing prices gone up? American Economic Review, 95(2), 329-333. doi:10.1257/000282805774669961

Jakabovics, A., Ross, L. M., Simpson, M., & Spotts, M. (2014). Bending the cost curve: Solutions to expand the supply of affordable rentals.

Monday, February 4, 2019

Grand Canyon University Should Let Ben Shapiro Speak

Last Friday, I received an Email from the school news regarding the school's decision to cancel an upcoming speaking engagement by Ben Shapiro. The rationale for canceling his appointment is to focus on opportunities that bring people together. It's not quite clear what they mean. The email goes on to list all of school's philanthropic causes and mentions campus diversity in passing, but never gives a substantial concrete reason for uninviting Ben Shapiro. The statement makes it clear that he was invited to address a specific student club, not the entire student body, so the reason why they think he should be bringing people together is beyond me. I'm not too familiar with Ben Shapiro. All I know is that he is a prominent conservative figure associated with the online anti-SJW movement and is often featured in click bait compilation videos dedicated to destroying libtards with facts and logic. While I recognize that as a private christian university, they have the right to not invite or ban any speaker they want, they should be considerate of their students' desire to listen to and discuss new ideas and opinions regardless of their popularity. Besides, we can only grow intellectually, and spiritually, by challenging old dogmas with ideas and information we have not yet considered. I attend GCU online and live on the other side of the country, so this recent turn of events is not personally relevant to me; however, for those student who live on campus or in the Phoenix metro area, the school should seriously consider their mission statement, which last time I checked, was about preparing students to become 'global citizens', critical thinkers, 'effective communicators, and responsible leaders. You can't do any of that living in your own echo chamber. Do the right thing; let the man speak.

Sunday, February 3, 2019

U.S. District Judge Rules Twitter is a Public Forum Setting New Precedent for Free Speech and Censorship

Sources: Duke Chronicle, Cornell Law Dictionary

Last year, several twitter critics of the sitting President sued Trump for blocking them and won. U.S. District judge Naomi Reice Buchwald, of the Southern district of New York, ruled that Trump had violated the plaintiffs' first amendment rights by excluding them from voicing their opinion on a 'public forum.'

We hold that portions of the @realDonaldTrump account—the 'interactive space' where Twitter users may directly engage with the content of the President’s tweets—are properly analyzed under the 'public forum' doctrines set forth by the Supreme Court, that such space is a designated public forum, and that the blocking of the plaintiffs based on their political speech constitutes viewpoint discrimination that violates the First Amendment.

This ruling should have wider implications than preventing Trump from blocking prominent twitter critics like Dr. Eugene Gu, who filed the lawsuit. Besides, Trump isn't the only politician that uses twitter to communicate with his constituents. Almost every representative, senator, justice and bureaucrat uses twitter to get their message out. In this sense, the 'private' social media platform could be considered a designated public forum for political discourse, and therefore should be open to all viewpoints. Unfortunately, there is no legal definition for online public forums. The Supreme Court outlined 3 types of public forums in the 1983 case of Perry Education Association v. Perry Local Educators' Association and all of them are defined in terms of physical space and restrict government officials from discriminating against certain viewpoints rather than public corporations like Twitter and Facebook. This could be a major problem when it comes to twitter itself banning or suspending certain users for unpopular political opinions or selectively enforcing their nebulous terms of service. Twitter's discriminatory actions keep people form engaging with their elected representatives all the same as being directly blocked by their elected representatives; the only difference is that the censorship is done by a corporation rather than a government agency or official. However, as I pointed out in a previous post, corporations are established by governments for the benefit of the public, and have no right to discriminate on the basis of race, sex, national origin, religion or any other protected class. It's only logical to add political affiliation and viewpoint, especially given the pertinence of twitter and other big social media platforms in our day and age.

Friday, February 1, 2019

Gentrification is A Land Use Problem

A growing concern on the left and especially among minority groups is demographic displacement, in certain cities and neighborhoods, caused by rising house costs associated with the influx of middle and upper-class, mostly white, young professionals. Due to economic illiteracy, the white yuppies and hipsters are blamed for rent hikes that make living in an area unaffordable for mainly poor minority tenants when, in fact, there is a third variable called land use policy (e.g. zoning ordinances, urban planning, property taxes) that has a much bigger impact on their rent. However, the left tends to frame this as a racial/cultural issue, which makes it simpler to talk about, but steers the conversation clear of any plausible solutions. Take for instance this gem that was featured on a liberal HBO show.

It’s basically when, for me, it’s a lot of white people come move into the hood and kick everybody out that’s there. I’ve been a witness of it since I was a small jitterbug so I mean now that I’m grown up and I’m seeing it, I understand it a little more,” he said during the interview with Maher, according to the news outlet.

Or how about these bozos, who protested an Austin, TX restaurant for moving into a building that was formerly occupied by a Mexican-American owned tire shop and using Spanish words to advertise their merchandise.

Activists with Defend our Hoodz — Defiende el Barrio on Friday announced via Facebook of their plans to protest outside Lou's Bodega on 1900 E. Cesar Chavez St. Since its recent opening by a pair of high-profile developers, the development has been widely lambasted by East Austin residents already anxiety-raddled over the brisk pace of gentrification that's resulted in soaring property values and residents' displacement.

The growth of commerce and population density will always raise land values; in this sense, gentrification is inevitable wherever new development occurs on relatively cheap land. Like any other market, higher demand raises the cost of housing, but since real property is fixed in supply to certain locations, unlike cars or smartphones, the market can only reach an equilibrium by lowering demand, which in the current case means raising rents. But the housing market does not have to be a sum-zero game. Removing artificial restrictions on the supply of housing can make it more affordable for low income minority renters. Zoning ordinances, such as those which restrict new development to single family housing, excluding group homes and multifamily complexes, require a minimum number of off street parking spaces, reducing space for potential residential units, restrict residential conversion, prohibiting the conversion of former office space into residential property, combined with lengthy permitting processes for new construction artificially inflate property values and rents in dense urban areas. Ordinances that dictate the minimum size of units, such as those in Oakland also drive up the cost of housing. In a white paper on housing development, the Obama admin noted that gentrification and other problems associated with surging housing costs are, for the most part, caused by local land use restrictions.

When new housing development is limited region-wide, and particularly precluded in neighborhoods with political capital to implement even stricter local barriers, the new housing that does get built tends to be disproportionally concentrated in low-income communities of color, causing displacement and concerns of gentrification in those neighborhoods. Rising rents region-wide can exacerbate that displacement.

The Obama Admin's Housing Development Toolkit drew from previous research on housing development, land use restrictions, and the widening gap between construction costs and new home prices. Previous research has concluded that for most U.S. regions, the price of new homes is only marginally greater than the construction costs. The exceptions are major cities, particularly in coastal regions, such as Los Angeles San Francisco, New York and Boston.

Researchers have also documented a sharp increase in the gap between home prices and construction costs, with stringent housing regulations now driving cost increases previously shaped by construction costs and quality improvements. Localized studies have supported these national conclusions – documenting sharp increases in zoning and other land use restrictions in metropolitan Boston, New York City, Los Angeles, and San Francisco.

The effect that increased zoning restrictions place on housing costs is best illustrated by these examples. For instance, in 1960 Los Angeles was zoned to accommodate 10 million residents when it only had a population of 2.5 million people. Today, the city is only zoned to only accommodate 4.3 million people with a much larger population of about 4 million people. Of course, the same problem has transpired accross the California coast.

Emerging research has shown that in areas with high-cost housing such as California, zoning and other land-use controls contribute significantly to recent sharp cost increases, reflecting the increasing difficulty of obtaining regulatory approval for building new homes.

Most importantly, cities and states experiencing 'gentrification' should, along with reducing zoning restrictions, shift property taxes from building values onto location values. This would further incent new construction and improvements to existing residential properties, while simultaneously discouraging real-estate speculation and recapturing the value that new amenities and businesses add to rental and selling prices. This would ultimately generate more tax revenue that could be wisely spent improving public transit, reducing traffic congestion and the demand for more parking spaces, which is a win/win for the environment.

The left can either choose to whine about gentrification and stay in a state of perpetual victim-hood or take meaningful action by reforming their obtuse zoning regulations and property taxes instead of protesting people for following the incentives their own governments create or asking for more rent control and subsidized housing, which only creates a housing shortage by forcing prospective tenants into a queque for affordable units. Gentrification could, and should, become a bipartisan issue, but the left would have to abandon their race baiting tactics and stick to hard economic analysis for that to occur.